An item is not material if:
A) The accounting equation (A = L + OE) does not include the item.
B) It decreases the qualitative usefulness of the financial statements, but not the quantitative usefulness.
C) Its cost is less than $25.
D) Its omission will not influence the judgement of a reasonable person.

Question

Quizplus · Accepted Answer

An item is considered material if its omission would influence the judgement of a reasonable person. Therefore, if its omission will not influence the judgement of a reasonable person, it is not material. The other options are incorrect because an item can be material even if it is not included in the accounting equation (A = L + OE), if it decreases quantitative usefulness or if its cost is less than $25.

An Item Is Not Material If